Tourist chiefs in the North want their VAT rate cut to compete with the Republic

More than 2,000 jobs could be created in the North if the VAT rate on hotels and visitor attractions there is cut to 5%, a report for the Northern Ireland tourism industry has shown.

Hospitality businesses pay VAT at a rate of 20% - more than twice that of competitors in the Republic of Ireland.

EU law prevents member states from setting different levels of the charge for different regions. That power will be repatriated to the UK after Brexit and the DUP is pressing for a speedy cut.

Howard Hastings, managing director of Hastings Hotels, said currency fluctuations between sterling and the euro are not grounds for long-term business decisions.

He said: "VAT is structural and would kick-start our tourism economy and these numbers understate the potential for delivery of more accommodation into Northern Ireland and the delivery of upstream benefits."

Hastings Hotels managing director Howard Hastings.

The study, carried out by Nevin Associates, is the first to look at Northern Ireland statistics separately from the rest of the UK.

A cut in the VAT rate for visitor accommodation and attractions would reduce British Treasury income by £4.2m (€4.7m) in the first year; however, over a five-year period the Exchequer would gain by £32m (€36m), rising to £109m (€123m) over a decade, it said.

Tourism-related businesses in Northern Ireland pay 20% VAT, compared with 9% by their counterparts in the Republic of Ireland.

Ciaran O'Neill, president of the Northern Ireland Hotels Federation, who runs Derry's Bishops Gate Hotel, said room rates at hotels in Donegal had risen faster than in his city.

"Because hotels in Donegal have a better margin they are able to price in a way that we cannot compete with."

The study also shows that in the Republic average spend per visit (€395) is almost double that of Northern Ireland.

The report forecasts that the cut would be worth £332m (€376m) to the balance of payments over a decade.

''It is time our ridiculously high VAT rate was reduced in line with many other countries, including the Republic of Ireland. Indeed 17 of the 19 EU countries have tourist VAT rates below 10%.''

Nigel Dodds, the DUP's senior MP at Westminster, said: "A cut in VAT in the tourism sector would boost that sector enormously - it would attract more visitors, create more jobs and be a massive boost to the economy in the long run.

"This is a win-win; a win for the Treasury and a win for Northern Ireland and win for people's employment prospects."

British business leaders have reacted with relief at the agreement of a transition deal between Britain and the EU amid fear firms could have faced a "cliff edge" break when the UK leaves in March 2019.

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